Short-term trend in HDFC Bank remains bearish, says Sameet Chavan

If HDFC Bank stock slips below 1,370, we may see extended profit booking in this stock

Trading started on a flat note last week as there was no major trigger on the global as well as domestic front. The index, however, gradually resumed its upward trajectory to reclaim 13,000 first and then clocked fresh record highs as the week progressed. Index specific, there was no major movement but overall bias remained positive as we managed to add another couple of per cent to the previous weekly close.
 

There has been no stopping for this recent marathon rally and it's been more than one and half month now that markets are giving gravity defying moves. In the week gone by, if we look at the benchmark, we may not get the real picture of the overall action; but if we take a glance at some of the individual themes like auto, individual stocks have given spectacular moves throughout the week.

On technical charts, we have been hovering in the overbought territory since the last 2-3 weeks; but sometimes the market does not respect the theory and hence, it can remain overbought for a long time as well. But in our sense, the optimism has now turned into a bit of euphoria and when such a condition happens, it's advisable to be a proactive bit and take some money off of the table, especially for a momentum trader. Undoubtedly, the broader degree trend remains strongly bullish and in case of any meaningful decline, one should stick to the 'buy on decline' strategy. As far as levels are concerned, 13,300 – 13,500 would be seen as immediate resistance zone; whereas on the lower side, 13,150 – 13,100 are the levels to watch out for.
 

If we meticulously observe the intraday charts, we can see a formation of 'Rising Wedge' pattern on hourly chart and hence, a move below 13.100 would lead to further profit booking towards 12.980 – 12.900. Hence, traders are advised to take a note of all these key levels and act accordingly.

Stock picks:

FORCE MOTORS

View   –   Bullish

Last Close   –   Rs. 1261.50

Auto sector was one of the few sectors who initiated the U-turn post March fiasco. We witnessed a V-shaped recovery in the first five months (April to August) followed by a brief pause of nearly two months. In fact, in the week gone by, some of the stocks from this space just took off and 'Force Motors' is clearly one of them. Due to the recent rally, stock prices are back to pre-Covid levels. We can see a breakout of the ‘Bullish Flag’ pattern on the daily chart. Volumes have been exceptional in the last couple of days' surge and hence, we expect the stock to continue this northward journey in the near term as well. We recommend going long for a target of Rs 1,420 in coming weeks. The stop loss can be placed at Rs 1,197.
 

HDFC BANK

View   –   Bearish

Last Close   –   Rs. 1385.60

Mostly, this marquee banking name is not associated with the tag of ‘Bearish’ along with it. The longer term view remains bullish but on a smaller time frame chart, we are seeing some signs of exhaustion, which may also be interpreted as a profit booking after a gigantic rally. During the latter half of the week, the stock prices started sulking a bit after some unfavorable news flow for this giant. This is getting reflected in stock prices as we can witness a slightly bigger bearish candle on weekly chart. In fact, on daily time frame, its challenging the key ’20-day EMA’ placed at 1380 – 1370. The moment we see this stock sliding below 1370, we may see extended profit booking in this stock. Traders are advised to sell on a bounce up to 1400 - 1410 for a target of Rs 1,320 in coming days. The strict stop loss can be placed at Rs 1,436.

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Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.